Can Rupert Murdoch save online news?

Lee also tweeted that lessons were being learned from the failure of TimesSelect, a now-defunct subscription programme which charged $49.95 a year for online access to the work of its columnists and the paper’s archives. TimesSelect launched in 2005 and drew 227,000 paying subscribers, generating about $10 million a year in revenue, but was closed in 2007 after growth projections were deemed too low. Instead, the site embraced a traffic-driven digital display advertising model – to the relief of the paper’s columnists, who disliked being shuttered behind a paywall.

In the UK Martin Morgan, chief executive of the ailing Daily Mail & General Trust, echoed Murdoch by telling the FT that DMGT was considering paywalls and micropayments for its consumer titles. “What is in some ways exciting is that the game is moving on from the broad-brush approach that nearly all content has to be free,” he said.

The clamour against “free” from industry execs is growing. As Murdoch pledged a new era, ft.com publisher Rob Grimshaw explained on an industry website that, without paywalls, advertising-only online businesses struggle. “If you start doing some simple maths on this thing, it becomes clear what a challenge it is. If you’re aiming to make $50 million a year from your online advertising business, which is not massive, you’re going to need 833 million page impressions per month at CPMs [cost per thousand page impressions] of $5 a time. If they drop to $1, you need 4.1 billion.”

The decision to offer free online content, with digital advertising the only revenue stream, has come back to bite the industry hard – and should never have been taken at all, says the FT’s chief business commentator, John Gapper. “There was an awful lot of nonsense talked about the desirability of making everything free on the net. But it was never a business strategy, only a slogan. And a lot of that nonsense was talked by people who had motivation to want all content to be free – Silicon Valley people, aggregators, hardware manufacturers, software manufacturers.

“They wanted all this information to be free because it improved the value of their businesses. And they sold everyone else a pup, saying that if all content owners didn’t make their content free, then somehow they didn’t get it.

“Actually, they were just bullying a lot of people with completely different interests from their own into adopting their interests. Now, that kind of worked as long as the graph showing online advertising revenues carried on going up pretty steeply, but as soon as it flattened out the penny dropped that maybe it wasn’t such a good idea to make all content free. At which point a lot of people have now got to the point that Murdoch’s arrived at, which is to say, ‘Sheer traffic is not going to bridge the gap, therefore we’ve got to think about subscriptions.’”

As flip-flops go, it was a spectacular of the genre. In November 2007, as the ink was still drying on News Corp’s $5.6 billion acquisition of Dow Jones, Murdoch addressed shareholders in Adelaide and gave an interview to one of his titles, The Australian, in which he made a series of comments which came as a surprise to many WSJ staffers. “We have been studying [wsj.com] and we expect to make that free,” he said. According to Reuters, he informed shareholders that he envisaged “instead of having one million [readers], having at least ten to 15 million in every corner of the Earth”.

Fast-forward to The Cable Show, a TV industry conference in Washington some 18 months later, and Murdoch had a very different message. In a foretaste of his comments at the earnings call, he said advertising on wsj.com would not make up for revenue declines on the print side of the business. “People reading news for free on the web, that’s got to change.”

So why the volte-face? Simple: Murdoch got a look at the books.

Steve Brill, who founded Court TV and American Lawyer magazine, has just launched Journalism Online, a venture that he hopes will save newspapers by recalibrating their business models to maximise revenues from digital distribution. “My partner, Gordon Crovitz, was the publisher of The Wall Street Journal. He said it would take him an hour to convince Rupert to change his mind when he saw the real numbers,” says Brill. “Rupert saw the numbers and changed his mind.

“There were two really important numbers that he saw. The first was that the WSJ has 85 to 90 per cent of the traffic it had before it started charging. You don’t lose traffic when you charge, if you continue a rigorous effort to let people sample, let some content be free on any given day. You can keep up the same traffic, but your core readers – 10 per cent – will buy it so they never hit a paywall. So it’s not like you flip a switch and either you have [digital] ad revenue or circulation. WSJ has both.

“The second thing he saw was that the cost of getting a print subscriber went down because, quite obviously, if you’re giving something away [online], it’s harder to get people to buy the print version. But if you attach a value to the online version then it’s easier to sell the print version and, most importantly, it’s much easier to sell the print version if you bundle the print subscription with an online subscription, which is what the WSJ and FT do.”

But some find it difficult to buy Murdoch as digital pioneer. Steeped in the worlds of newspapers and satellite TV, the notoriously technophobic News Corp chief was initially reluctant to invest in digital, balking at the high prices for online brands in the early stages of the bubble.

He appointed James, his youngest son, as executive vice-president with responsibility for overseeing News Corp’s global internet strategy, and his attitude towards the web began to defrost. In July 2005, the acquisition of Intermix Media (including the star property MySpace, as well as 30 other sites) for $580m was seen as a watershed moment in News Corp’s internet ambitions. But although the deal was hailed at the time, much of the gloss has since worn off. Indeed, Murdoch’s entire digital division (which News Corp refers to as “Other Assets” on its website) had a distinctly lacklustre showing in the most recent third-quarter results, posting an operating loss of $89 million.

Journalist Michael Wolff, who spent nine months interviewing Murdoch for his biography The Man Who Owns The News, is dismissive of News Corp’s digital credentials, arguing that the group lacks any genuinely coherent strategy. “Throughout News Corp there is just no premium on digital anywhere,” he says. “In the case of MySpace, they’ve screwed it up. They arguably had $25 billion in value in that. Today it’s worth, I dunno, $600 million? It certainly is heading south, and they’ve been trying to get rid of it. And as far as wsj.com is concerned, they bought that, so they get no credit there.

Comments

Great assembly of the issues but one element I'd like to read a lot more about in this debate is advertising.There are two ways to improve the revenue from content online. 1. the blunt and old-fashioned way of charging directly for access. 2. the more challenging and ultimately more desirable way of creating truly effective high value advertising which sustains the model. Far more demanding a task to take the alternative route and work with advertisers to truly monetise the audience. That is the real prize, not just closing off access -- charging a fiver and wondering where the readers have gone. Read The Times and thelondonpaper together sometime and you will start to see that charging isn't necessarily a defence of quality. One is converging towards the other...the wrong way.

Peter Bale

Jul 8th 2009

Really? That is what the smart people he has working for him have come up with.

How about a different direction? Yes charge people a subscription fee but make it truly useful. Let people be the editors of their own daily newsfeed tailored to their interests and downloadable for printing or onto an ereader or ipod type device as and when they want it.

Let the user decide what they want and where it coems from and act as a conduit for payments back to the content providers (professional and amateur) - so I want world, national and local news, Mark Steel from the Independent and Charlie Brooker from the Guardian, the crosswords from the Glasgow Herald and the Times, cartoons - Dilbert, Nemi and penny-arcade and sport missing out out cricket and rugby. Even let it graze and pay my favourite bloggers for their efforts. Hell - for the fun of it put the occasional lolcat in the comics page

Yes you could do all that with clever rss feeds but it would take time and too much effort for most.

If you want people to pay for it you're going to have to make it tailored and put them in control. A Last.fm for news. You never know if it is genuinely targeted and useful I might actually read the advertisements.